The European Rescue Fund Runs Out Of Candidates For Managing Director

The European Stability Mechanism (ESM), more commonly known as the European rescue fund , has run out of candidates to replace the current managing director, the German Klaus Regling . After several failures during the last meetings of the European finance ministers, the Portuguese Joao Leao and the Luxembourger Pierre Gramegna have withdrawn their candidacies and have left the race deserted, as they jointly communicated yesterday.

The process to replace Regling, who has been in charge of the institution since it was born, is complicated because his mandate expires on October 7 . In the last Eurogroup meetings neither Gramegna nor Leao, both former ministers, had obtained the necessary support. On the one hand, Germany is opposed to a country that has received credits from the MEDE directing the body, as is the case with Portugal. On the other hand, Italy, which initially presented its own candidate, is opposed to Gramegna’s candidacy.

80% support
Any candidate needs 80% support in a vote that is weighted according to the capital that each country has contributed to the ESM. That is why the vote of France or Germany is equivalent to 20% respectively, which gives them veto power. Until now, France would have supported Leao, but Germany supported Gramegna, which has rocked the election and forced the president of the Eurogroup, Pascal Donohoe, to start from scratch.

Until 7 October
According to European sources, both candidates withdrew from the race upon verifying that they did not have sufficient support to reach this 80% and now Donohoe is starting the consultation process again to identify a new candidate who does have a chance of reaching this qualified majority. . The calendar, for now, is maintained with the expectation of finding a replacement for Regling before October 7, although it seems complicated considering that the process for his replacement began in March, with four candidates: the Italian Marco Buti and the Dutch Menno Snel in addition to the two who have retired this week.

The board of governors of the MEDE, formed by the finance ministers who meet in the Eurogroup, is the one who formally makes the decision to appoint its managing director.

Regling was chosen in 2021 to lead the ESM after having led the European Financial Stability Fund (EFSF), a temporary mechanism for the euro zone, since its creation. Since then, the role of the Mede has been less clear, marked by the stigma of the financial crisis and after the European Union agreed to issue common debt to weather the crisis caused by the pandemic, which left the line of credits that the institution specially enabled for the pandemic and is still available until the end of 2022.

To date, the Mede has activated rescue programs for Cyprus, Greece, Portugal and Ireland . In the case of Spain , it was used for the recapitalization of its banking sector in 2012. With all this, it has disbursed more than 260,000 million euros with these programs that grant cheap credit to the countries of the euro zone.

Leave a Reply

Your email address will not be published. Required fields are marked *